The first week of the two-pot retirement system was a historic milestone for South Africa’s retirement industry. This significant reform marks one of the largest changes ever seen in the sector and it has been a mammoth task to implement. The strong collaboration across all stakeholders – including retirement fund administrators, employers, advisers, SARS, FSCA and ASISA – has highlighted the resilience and strength of our industry and commitment to implementing these reforms for the benefit of members.
Despite initial challenges, Alexforbes, along with the rest of the industry, is working through an unprecedented level of claims. The initial number and value of claims have far exceeded expectations, landing at the upper end of our forecasts.
We anticipate that at this rate we can expect a positive impact of between 0.3% and 0.7% in of GDP this year as set out in recent research published by the South African Reserve Bank.
In addition, the current level of activity highlights how important retirement fund investments are in the lives of individuals and that the new system has resulted in a significant increase in engagement levels. However, the recent activity also highlights that we have a long way to go to educate individuals to make sound financial decisions.
While there is no doubt many members who are financially stretched and need to access their savings pot for relief, there are many who are doing so simply for short- term consumption or misunderstanding that their option to withdraw is available on an ongoing basis and there is no need for rushed decisions now. It is important for individuals to think carefully about their decisions, seek advice and consider the long- term impact on their retirement outcomes.
Alexforbes Insights: Week 1 of the Two-Pot Retirement System
· 78,000 claims have been received and are being processed. This is equivalent to the number of claims we were processing over a 6-month period before the new legislation.
· The total value of claims currently being processed stands at R1.5 billion, of this, we estimate at least R270 million will be paid in taxes.
These claims are at various stages, including awaiting SARS directives, completing bank validations, with many payments being processed.
As South Africa’s largest retirement fund administrator, Alexforbes has received and processed the highest volume of claims in the industry. We expect this level of activity to continue in the coming weeks. Alexforbes will continue to provide regular updates on the implementation of the two-pot system.
KEY INFORMATION
Market fluctuations and savings pot values
The value of the savings and retirement pots can change daily because they are invested in the markets, not held as cash. These fluctuations are a normal part of investing. While short-term ups and downs happen, long-term growth remains the goal. We encourage members to take a long-term view when considering the value of your savings pot.
Withdrawals from the savings pot
Retirement fund members can withdraw from their savings pot at any time during the tax year, but only once per tax year. There is no deadline for making a claim, as the savings pot remains accessible year-round.
Calculate your tax and fees
Use our online calculator on the Alexforbes My Money Matters web page to estimate the tax and fees you’ll pay on your withdrawal from the savings pot.
Processing timelines
Withdrawals can take up to 20 working days to process due to several factors, including SARS directives, bank validations and the extremely high volume of requests.
